Moody’s Investors Service on Thursday downgraded India’s economic growth forecast for 2022 to 7.7 percent, saying rising interest rates, uneven monsoons and slowing global growth will continue to dampen economic momentum.
In May, Moody’s forecast that India’s GDP will grow by 8.8% this year. The economy will grow by 8.3% in 2021 and shrink by 6.7% in 2020 when the pandemic hits the country.
In its update to its 2022-23 global macro outlook, Moody’s said the Reserve Bank of India is likely to maintain a hawkish stance this year and a reasonably tight monetary policy stance in 2023 to prevent a further build-up of domestic inflationary pressures.
We expect India’s real GDP growth to slow from 8.3% in 2021 to 7.7% in 2022, and further to 5.2% in 2023, assuming rising interest rates, uneven monsoon distribution and slowing global growth will continue to dampen economic growth momentum,” Moody’s said.
It expects inflationary pressures to subside further in the second half of the year (July to December) and into 2023.
“A faster fall in global commodity prices will give a big boost to economic growth. Furthermore, if the private sector investment cycle picks up, economic growth in 2023 will be stronger than we forecast,” he added.
According to Moody’s, high-frequency data on the Indian economy showed strong and broad-based underlying momentum in the first four months of the 2022-23 fiscal year (April-July).
According to official GDP estimates, India’s economy grew by 13.5% in the April-June 2022-23 period, up from 4.10% in the previous quarter.
Moody’s said economic activity in the services and manufacturing sectors rebounded strongly, based on hard data and survey data such as purchasing managers’ indices, capacity utilization, liquidity, tax reporting and collection, corporate earnings and credit metrics.
Inflation remains a challenge, however, as the RBI needs to balance growth and inflation while reining in the impact of imported inflation from the roughly 7% depreciation of the Indian rupee against the dollar so far this year.
“India’s economic growth has slowed significantly in the pre-COVID-19 shock due to the impact of corporate sector deleveraging on business investment.
Moody’s added: “Corporate sector investment is showing early signs of recovery as deleveraging completes, which could support the business cycle for a few quarters, supported by investment-friendly government policies and the rapid digitization of the economy. continued expansion.”
Moody’s said economic activity in the services and manufacturing sectors rebounded strongly, based on hard data and survey data such as purchasing managers’ indices, capacity utilization, liquidity, tax reporting and collection, corporate earnings and credit metrics.
Inflation remains a challenge, however, as the RBI needs to balance growth and inflation while containing the impact of imported inflation from the roughly 7% depreciation of the Indian rupee against the dollar so far this year.
“India’s economic growth has slowed significantly in the pre-COVID-19 shock due to the impact of corporate sector deleveraging on business investment.
Moody’s added: “Corporate sector investment is showing early signs of recovery as deleveraging completes, which is likely to support the business cycle in a few quarters, supported by investment-friendly government policies and the rapid digitization of the economy. continued expansion.”